(Yicai Global) Feb. 8 -- Activity in China's services sector expanded at the slowest clip in five months in January amid renewed outbreaks of Covid-19, according to a widely watched private survey.

The Caixin purchasing managers’ index for services stood at 51.4 last month, down from 53.1 in December and the lowest since August, data released by financial media group Caixin showed yesterday. A mark above 50 indicates expansion.

The Caixin purchasing managers’ index for manufacturing, released on Jan. 30, fell to a 23-month low of 49.1 in January, from 50.9 in the prior month. The simultaneous decline in the two major activity gauges dragged down Caixin’s composite PMI by 2.9 percentage points to 50.1, only just inside positive territory.

The decline was in line with that of the National Bureau of Statistics. The official manufacturing PMI fell 0.2 point to 50.1, while the services PMI saw a decline of 1.7 point to 50.3, driving the official composite PMI 1.2 point lower to 51.

In terms of sub-data, the epidemic has brought more negative effects, constraining the pace of supply and demand expansion in the services sector. Foreign demand ended nearly three months of expansion amid the surge in the epidemic overseas, with Caixin’s new export orders index falling into contraction range and recording the lowest level since November 2020.

Caixin did not provide specific data for each sub-index in the press release.

The slowdown in the expansion of supply and demand also caused employment to fall back. The services sector jobs index fell into negative territory in January for the first time in nearly five months, although the rate of contraction was minimal.

Market optimism also waned. Although the services business expectations index was still positive, it was the lowest in 16 months. Companies generally said that once the pandemic subsides, market conditions will improve, with new products and new market development set to support expectations for higher output. But uncertainties related to outbreaks remain a major concern for businesses.

Regional Covid-19 outbreaks have increased the downward pressure, said Wang Zhe, a senior economist from Caixin, adding that economic policies should focus on stability, jobs, structural industrial improvement and support for small and mid-sized firm to reduce corporate financing costs.

Editor: Tom Litting